Advice to Stock Investors in a Rough Market Scenario

This article details the strategies and what investment experts are proposing as market product investments to sustain through a rough market scenario.

Today most stock investors are not seeing smooth sailing and uncertain times are predicted ahead. At such times there might be several types of advice that comes in and it might be hard to choose advice that would reap the results. Here is some sound advice which one can bank upon.

Those who are investment experts are proposing exchange traded funds that are defensive in nature. These funds will help investors to hold on through tough and volatile market situations. Those are in the market for long stay and refuse to get out even when the markets get tough; there are several strategies or funds as well as portfolios that investment advisors offer to get through such situations. Exchange traded funds or ETFs are designed for such situations, though there are several such funds out there and it might be difficult to choose the right one.

ETFs and their features

The ETFs are usually anti volatility, market products that are designed based on one of three strategies. forfor for for A popular strategy involves manipulation of the portfolios by choosing the securities carefully and weighing them right. They are usually picked from a broad index so that the returns are less volatile as per the time span, even compared to the market from where they are drawn from. For instance, defensive stocks could comprise of health care, consumer staples as well as utilities sectors. The underlying principle in ETFs comprises of treating volatility as an asset class and adding it to the portfolio. Hence, whatever losses occur is seen against the gains of the other investments.

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Prediction of markets in the near future

Many experts provide a grim view of the world markets in the upcoming future. That is mainly because it is considered that assets in world markets are overvalued to a large extent. Stock prices have reached new highs over the past and market analysts are still seeing gains in the recent future. However, the stock values and their rise are underpinned by liquidity and financial engineering. Hence, the stage is set for global crisis to come in the financial markets akin to 2008 and 2009. The conditions are established in the global market scenario:

  • Financial assets are overvalued
  • Leverage has been significant
  • Deflation and low growth have been persistent
  • Investors have taken excessive risks based on the liquidity policies of central banks
  • Suppression of volatile factors

A way out of such a forthcoming market scenario is to cling to bonds that are ultra safe and to invest in utility stocks. Since 2014 the corporate profits have been stagnating and even declining. Stock prices are driven by liquidity and that has been heightened by the zero interest rates that central banks have been promoting. Currency volatility is another factor that affects the market. Commodity prices on the low side have affected the earnings of resource firms. These and other factors can be Found Here are bringing on the Predicted Market Scene which is ready for a meltdown.

How to Survive a Long Term Bearish Forex Market?

Most financial markets experts are talking about how the policies of the Central Bank seem to be ineffective in generating a sustained path of economic growth. Investors are also revolting against the policies that Central Banks are trying to implement as they feel that these policies can have a detrimental impact. However, there is a larger impact and trend that is emerging across global financial markets that one needs to be aware of.

This Article talks about the oncoming scenario in the forex market and how investors should face the situation.

Market condition

The equity markets witnessed steep declines, but also oversold dramatically. If this is talked about in terms of rate of change, the markets have been as oversold this year as it was during the period of 2011 and 2012. At that time the European and the US debt markets saw corrections. However, the overselling of the markets was not as much as it was during 2008 with the collapse of the Lehman enterprise. Even if experts do not think that the situation is as bad as the second half of 2008, the market structure in general has become more fragile this year which has culminated over a long time.

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Timing market investments

Even though market experts will talk about the efficient market dynamics or the Wall Street propaganda, there are times when investors need to get into the forex market while in other cases they need to get their money somewhere else. The question of how to time the market might be a difficult one to answer and plan. When Central Banks are trying out experimental policies the timing of market investments then the situation become even more difficult, at such times, investors would do well to remember the concept of bull and bear markets and look at the long term trends.

Secular trends

Research done on the market conditions and prediction of the general direction showcase the general direction the markets are taking. Usually there are extended periods when the markets surge and then stall. These are known as secular bull and bear markets. The market valuations like price and earnings ratios either increase in their values or are mitigated during these periods. While bull markets start with such values being below average, the bear markets do not end when the price and earnings ratios are above average. One needs to understand that these concepts are long term. Hence, one cannot simply use the earnings of a year of a corporate scenario to predict the start of a trend, but the scene needs to be checked over a long term.

As per the secular bull and bear market analyses, it is clear that the equity market in the US remains in the bear phase that started at the beginning of the new millennium. The price and earnings ratios remain at the peaks from where bull markets usually start. Hence, this indicates that this might not be the time when one should heavily invest in the markets. It is predicted that the bull market will continue with share prices falling for a decade or more. For more related information on Forex Markets, Check this Link.

US Equities in an Unfavorable Position

Investors in US need to brace for an uncertain market scenario this year, especially in the equities market. This year there are several outsiders in the presidential race, which has brought about anxieties. This is also compounded by factors like a low oil price market as well as a slowdown of the global economy. The S&P 500 index is around 9.4%, which can be compared to the annual gain of 6.54% that is a common occurrence in the fourth year of a presidential term. These are findings that have been put forward by the investment advisory art of the wealth and management division of Wells Fargo.

Democratic candidate Bernie Sanders and Republican candidate Donald Trump has won their primaries respectively on Tuesday and this reflects that there is not much confidence of the political status quo being maintained as well as the economic status. If such candidatures are being considered, this will only muddle up the outlook for stocks. This is a time when the market needs clarity, but with several possibilities on the presidential race, uncertainty still looms large.

1The investment experts feel that, when candidates with radical ideas and diverse opinions might come into office, it is unclear the impact that it would create on the market as well as the economy. In general, the returns on large cap stocks are reigning higher than average at present. Equities on the other hand, are coming down as there are concerns about falling oil prices as well as the slowdown of the global economy which started in 2014.

Interest rate trends

The discontent that might be reflected in the voters might be due to the higher crisis concerns and lower growth rate that is troubling the nation. Even with seven years, having gone by since the last recession, the growth rate was only 2.4% last year. The interest rate was raised by the Feds two months back, which happened after a decade nearly. The rate had been held near zero since the end of 2008 in order to boost the economy. However, the market turmoil that is being witnessed now will probably lead to questions as to whether the feds should keep increasing the interest rates and what impact it would have on the economy.

Advice to investors

In such a backdrop, Wells Fargo advises investors to diversify their portfolio so that they add to adequate protection measures against volatility. Investors are recommended that stocks be held onto and bonds of the investment grade category can be added to the portfolios in order to stabilize the same. Even if the equity returns are falling, investors are advised to hold on and to look long term. For More Information on US Investment Scenario, you can Look Up Relevant Articles Here. It is also advised that investors keep a track on the economy and market news, but seek advice of experts before they take any investment decisions, especially with respect to which sectors to invest in and which sectors to move out of.

Interest Rate Trends in the US

If you think that the Federal Reserve might announce negative interest rates that might seem like a far fetched idea but banks are being told to prepare for uncertainties as per the market conditions. This might be one of the few times when US central bank as well as the governing agency is included stress tests in order to consider the possibility of Treasury rates becoming negative. Till now the situation is considered as hypothetical. However, it definitely showcases a scenario where zero rates are not enough and these could soon morph into negative rates as well. This is an outcome of nations trying to devalue their currencies as compared to other nations. A nation that is in economic slump might think that the best way out of the situation is to reduce the value of its currency in the forex market. It does so by making its exports cheaper and attracting currencies that have higher yield in the market and more buying power.

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Effect of lowering of interest rates

When a country sees success in this strategy, others wish to emulate the same. As more and more countries follow the same strategy, central banks keep devaluing their currency and hence, negative rates soon become a possibility. With such a scenario occurring worldwide, about a third of sovereign debts have negative yields in the market. Soon, the expert led growth policy which was considered to stimulate lending becomes an ineffective tool. This is the case with Japan right now. Today zero interest rate policy has become a negative interest rate policy. It is no longer a hypothetical situation. It is a possibility and the fate of a central bank system which is facing a slow global economy. Japan has adopted the negative interest rate policy last week and hence, US Federal Reserve could soon follow suit. This reflects the current policy stance of most central banks in order to counter falling demand and weaknesses in the global economy. It is not a very reassuring scenario and exports do not have much faith in the stock markets being pulled back to position by this stance. However, with US Feds having raised interest rates, if it needs to change its stance again, it would seem like defeat for them.

Negative interest rates

However, with the current market scenario, many high ranking officials are considering the proposition. The Fed vice chairperson stated that the negative rate experimentation by Europe was working well and that has led to the US Feds considering going the same direction. With interest rates going into the negative zone, this would lead to banks finding it hard to store reserves and hence, pushing the money out in the economy in order to stimulate growth. It might work as per theory and as per Europe’s feedback, but there would be associated problems seen as well. Here is an Article where you will find Information about the US Economy, which is needed for investors. These are signals that determine the state of investment in an economy and should not be ignored.

Analysis of USD and JPY in Forex

Most experts agree that the risks are elevated between these two currencies. There are different kinds of risks that are associated with forex trading. The inherent market risk is present in case of all kinds of forex trading. The other risks are liquidity and event risks. Bank of Japan reported the call around action to be an event risk. It is unlike any economic release event and could occur at any time. The result of the occurrence was seen by the forex traders recently when USDJPY remained at 14 pips in an unchanged form.

With elevated risks, Forex trading resembles gambling. People are not sure when there would be a call for dealing or if the rumors of calls will surface. Many think that they are sure of the movement, but that is again a false notion.

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Managing market risks

When market risks need to be managed through price action this can be done through technical expertise. Event risks, however, tend to override market risks. If one looks at the weekly forex chart of these two currencies, the price has been moving below the trend line. The law has fallen short of 61.8% of the retracement that occurred in July 2014. The low came to a figure of 110.96 which is the highest value as compared to May 2010. If one views the hourly charts, one will see acceleration in the trend, especially in the lower channel lines which hover around the 111.88 region.

Trading between both currencies

In general, today’s Trading of JPY against USD is a complicated trading to undertake. If one chooses to see JPY against US notes, bills and treasury bonds, this might become simpler. Interest rates are a driver in this context. Hence, when looking at forex trading between these two currencies, one would need to judge the risks in terms of the interest rates. If the direction of the interest rates is judged right, the direction of the trading can be decided as well.

As per traditional times, USD and JPY is a currency pair that correlates with US treasuries. If the bills, notes and treasury bonds rise in value, the prices of this forex pair weaken. One needs to take a long position with respect to trading in this forex pair. The logic behind this trading position is that, bond obligations are always kept by the US government and hence, anything related to these would be safe. When interest rates go up, Treasury bond prices go down. This in turn tends to make the US dollar value go up and it will strengthen the USD/JPY prices. In such a scenario, more yields require from the Treasury bond trading which leads to a lower price of the forex pair. It is considered to be a short position. There is an inverse relationship between bond prices and yields. If yields go down, there is a need for liquidity. This inverse relationship is known as market risk. To know how to trade in forex with less risks Refer to the Article called Tips on How to Invest in Stocks without Major Risks.

China is Accumulating a Lot of Gold

The Chinese are investing a lot of money on buying gold. The country is seeing a huge gold shopping binge.

There is no confirmation from the Chinese government as to how much of gold they are accumulating. But, one thing is sure that the gold is heading to China through Hong Kong. The latest data from Hong Kong suggests that China has boosted its gold import by over 700% since 2010.

The central bank of China looks to be buying more gold and selling the other foreign reserves. It is purchasing gold on a monthly basis in spite of total reserves falling every month. There is a report spread in the media that the People’s Bank of China has amassed 580,000 ounces of gold to its reserves last month. The bank now has a total of about 57.18 million ounces of gold. This accounts for an increase of about 0.9% of its gold reserves from December.

There are no details as to what China is exactly doing with this mass accumulation of gold. Even though all the rich people in China are investing in gold, but that will not be a proper explanation for this massive storage of over 57 million ounces of gold. The Chinese government, though, are saying that their gold reserves have just grown by a little in the recent years. This is not true as to many of the analysts.

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The total foreign reserves of China are falling every month and it has slipped by $99.5 billion to close at $3.23 trillion last January. This is the lowest foreign reserves that China has seen since May 2012. The decline in January is considered to be one of the worst declines that China has seen in the recent months.

There are many analysts who believe that China is letting go its foreign reserves and buying Yuan in a bid to boost its weakening currency and to help out its brittle stock market. The main reason behind China looking to invest in gold and selling of its foreign currency is to make its currency Yuan a traceable and an international currency.

The central bank is looking to bring its economy to a stable level and it does not mind diversifying its reserves from the American dollars. This could be the reason why it is on a gold purchasing spree.

China is looking to show the world that its currency has strength and this explains why they are investing in the yellow metal. The Hong Kong data shows that China had imported 100 tons of gold in 2010 only and this has now increased to just under 1,000 tons in 2015.

It might be interesting to note that China is one of the world’s largest gold miners and hence it is buying as well as mining a lot of gold every year. There is no doubt that the Chinese government is one of the biggest buyers of gold followed by the rich and wealthy people of china. Click this Link to know ‘What is the Reason Behind the Popularity of Forex?’

After oil, gold is the most traded commodity all over the world. All this effort and investment in gold is just to make their economy stabilize.

Clients must be Reminded of their Investment Goals

If you are a financial adviser, then it is also your responsibility to remind your clients on the investment goals that they have set from time to time.

As a financial adviser, you will have to remind your clients about the goals that they have set during the uncertain market period. You should always highlight to them that they are working towards a goal and not for a desired return. If clients know that they are on the right track and can achieve their goal, then they will never think of anything else than staying invested, no matter what the market situation is.

A clear set of goals will help the clients to make better financial decisions in their life and to not rush things and hit the panic button when the trading is down. The role of the financial adviser is to help their clients to make better decisions on their investments.

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One of the simplest ways of keeping focus on the set goals is to write it down and ask the client to take a look at it whenever they are restless. One of the best ways is to give a structure to the goals of the client and charting down certain plans to achieve the goals will help the clients understand their goals better. This will help them to know where they are at present and where they need to go.

Never feel shy to talk about the goals to the client or to remind him or her about the goals sometimes. You should never take a back step from reminding the clients that wishes will not turn into reality unless there is some action taken to achieve the wishes. You should help your clients to be clear about their financial goal, so that they will not be tempted to take an untoward situation. Reminding about their goals at critical moments will help clients take better decisions. Clicking Here to know ‘Look Beyond Traditional Investment’ will give you tips on all kinds of investment you can make.

If you have set of goals based investing, then the objectives to achieve these goals must be perfect. You should suggest your clients to spread their goals into four categories:

  • Things that would need at present (e.g., Child’s special needs, home renovation)
  • Things that would want now (e.g., Summer vacation every year)
  • Things they would need later (e.g., Regular income after retirement)
  • Things that they would want later (e.g., Charity donation)

This will help the clients to make clear cut goals and to put their money in the right portfolio. The client must be told that their path to their goals is not a linear one and can deviate from their path by about 10% to 20%. This way there is every chance for the clients to land on the right goal spot.

People must be helped to get clear about why, and not just how or how much they are investing. It is important for you as a financial adviser to take your client towards a conversation about their goals to help them set realistic goals in investments. Wishes are undefined things that do not have a structure and will finally remain as a wish. Hence, help your clients to set goals as they will have the structure.

Mistakes You should Avoid when Investing

If you are a novice looking to invest your hard earned money in stocks and shares, then it is important for you to understand the mistakes you should avoid as a rookie.

The Following are some of the common mistakes that a person looking to invest in markets afresh makes.

Never allow emotions to come between investing

One of the common mistakes that DIY investors make is to quickly switch their investments into cash because of fear or greed. You need to understand that it is a marathon out there and you need to wait for various market cycles to happen before even thinking of selling of your investment in the market. It is better that you prepare a proper written plan with your goals and objectives before investing and also the funds you intend to allocate for trading in markets.

Never trade more

There is no doubt that trading has costs attached to it. The more you start to trade, the more costs you will incur. You should always think of buying assets at a reasonable price and have the will to hold on to the assets for long. Never ever switch in and switch out of funds quickly as commissions will eat your money.

Never think of timing the market

Many people start to invest in the market with one goal in their mind, buying at low prices and selling at higher prices. You should never trade with this intention as there are millions and millions of wise people trading in the market and this plan will not work every time.

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Stay clear of poor diversification 

It is vital for you to not invest all your money in one stock that you feel will help you to earn money. You should diversify your investment into a wide variety of classes. This will help in reducing the risk in your portfolio. Diversification does not mean that you have to own more stocks. You should have knowledge about how investments are moving in relation to the other.

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Patience is the key

If you are looking to invest in stocks to fund your retirement or to take care of your child’s college education, then make sure that you have lots of time on your side. You need not check the status of your portfolio every hour. You just need to review them on a quarterly basis. You need not worry about markets varying every hour and concentrate on analyzing the performance of the companies in the markets.

Opt for transparent advisers

If you are looking to find a financial adviser to help you out in investing your money, you need to look for one who is quite transparent. You should know how advisers are paid. Some advisers charge you on a fee based system, while others would charge a commission on the financial products that they sell. The source and the amount you pay have to be properly considered. You will have to pay your adviser, according to the type of service you want.

China’s Forex Reserves See a Three Year Low in January

China has seen a three year low of its foreign exchange reserves in January. This has now raised serious questions over China’s policy to safeguard Yuan by burning their funds.

The drop in the foreign exchange reserves of China is said to be the lowest in more than three years. It has been reported that the Chinese stockpile of foreign currency fell by $99.5 billion in January and now it is at $3.23 trillion. There was a bigger drop seen in December as well as the China’s foreign currency reserves fell by a record $107.9 billion. It has been facing a decline since August last year and the trend seems to have no end.

The central bank had devalued Yuan in mid August all of a sudden. The bank said that it is doing this to bring the value of Yuan to be on cue with the market forces. This action by the central bank has boomeranged very badly. The investors started to sell off their currency in a hurry. The outcome of this was that the central bank dug into its reserves to stabilize the currency.

Also, last month the central bank once again intervened and drew its reserves to help the weakening Yuan to recover. This move has led to a deeper slowdown of the Chinese economy. This set off a selling of the stocks and commodities in the international markets.

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The economic analysts and the Forex investors are not happy with the frequent interventions made by the central bank. There are doubts in many people’s minds as to how the central bank will be able to stabilize the currency and to prevent the money from going out of the country. If you want to know more about Forex and why it is so popular, then Look Here for an ExplanationWhat is the Reason Behind the Popularity of Forex?’

The central bank of China is expecting this to be a long drawn battle. The slowing of the economy is no way, helping the bank. Hence, it is finding it very difficult to stabilize the currency. As the bank is having enough money in the reserves to withstand such shocks, it will continue in the same vein for some time.

There are fears in the trader’s mind that the poor domestic economic conditions will make China again think of devaluing the Yuan. But, they can breathe a sigh of relief as the Chinese rulers have said that there will be no huge devaluation of the Yuan in the near future.

The current drop in the foreign reserves of China is lower than what was expected. This will make traders and people to be not thinking of China all the time. But, there are no concrete evidences from the Government or the bank side as to why the devaluation of the Yuan is taking place and why there is an economic meltdown in China.

The fear that China has lost its control over Yuan is very much new to this country. The recent fall in the foreign exchange reserves is in complete contrast to the piling up of cash a few years ago  when China’s economy and its exports was seeing a huge boom.

Oil Industry Worried as Storage Levels are at Critical Point

The oil storage tanks located in Cushing in Oklahoma are now edging near the critical limits and this is really a cause of worry for the oil industry in the U.S.

The New York Mercantile Exchange, crude oil contract’s delivery point is Cushing. This is where about 13% of the United States oil storage is and it has a storage capacity of 73.014 million barrels of oil. But, the storage levels are dipping in Cushing as the days go by and the last recorded level on January 29 suggests that there are just 64.174 million barrels of oil stock. This means that the storage capacity is just 88% full.

The Nymex terminal complex where they keep tag of the inventories feels that the storage is already at a critical lower side. Only 6 out of the 7 barrels at the Nymex hub are filled with crude oil now. If you have plans to invest in oil stocks, then it is better to Read This Article about Investing in the US – Tips for Beginners by clicking on the link.

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Cushing in Oklahoma is a blending station where the mid-continent’s crude oil is mixed to get the specified grades that are needed by different refineries. There is every possibility of a situation raising the country wherein there will be so much of oil, but the country will not be having the right kind of oil.  Also, building tanks to store the excess oil will take a lot of time and also it would cost a lot of money. There would also be debates on who would be funding for building the tanks.

At present, there is excess of crude oil in the U.S. that is coming from the domestic production, from Canada by rail and through the storage at the Gulf Coast. As the crude oil volumes go up, it could be difficult for the local pipelines to consume these huge volumes.

The macro strategist at Seaport Global Securities, Richard Hastings, said that he does not feel that the Cushing storage capacity will not reach its maximum storage capacity as the crude oil will be back up in the Midwest area and particularly the Gulf Coast.

The problems in the Cushing storage capacity will make the Gulf Coast crude oil volumes to be at higher levels. This will mean that the price of the crude oil has to be altered and this is a problem that all the global benchmarks will witness in the near future.

There was a prediction by certain market analysts that the U.S. will be running short of crude oil storage spaces in the near future. It looks like this prediction has come true. They even predicted that the prices of the crude oil will touch new lower levels of $30 a barrel. Even this has come true. The storage dearth is one of the reasons for the crude oil prices to drop to $30 a barrel.

The WTI oil futures closed at just $29.69 a barrel this Monday. These are alarming signs for the crude oil industry and without proper storage facilities one can see the prices drop even further.